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London hotel market outperforms the rest of the UK according to new study
December 13, 2011Article by Ray Withers
According to a new study by STR Global and Whitebridge Hospitality, London hotel profitability over the last 11 years has outperformed the rest of the UK seeing the profit gap between London and regional hotels across Britain widen since 2000.
London hotels between this time and 2010 have experienced a real gross operating profit. Having managed to keep up with inflation according to the study, London hotels have performed better than the rest of the UK which has seen profit margins in regional hotels decline by 11.6% since 2000 with a 6.7% drop in the compound annual growth rate for real gross operating profit over the same period.
While Elizabeth Randell, STR Global managing director suggests that the findings ‘highlight the tougher market conditions for regional UK hotels’, the findings display positive news for the capital where occupancy levels at London hotels have risen from about 82% in 2000 to nearly 85% in 2010.
Meanwhile, the average daily rate (ADR) at London’s hotels increased from £140 back in 2000 to around £145 last year, while by comparison, regional hotels in the UK have experienced a decline in ADR, from £85 in 2000 to just £70 in 2010.
Ray Withers, Director of property investment experts, Property Frontiers, comments,
“The findings from the study show that London is the best performing player. It is no secret that there is an air of uncertainty surrounding the capital but the overall trend for London has been positive, showing itself as a resilient hotel market while the rest of the UK has found it difficult to manage inflation causing performance losses. With this in mind, the hotel market in London this year has been forecasted at near double digit growth while 2012 is expected to be a record breaking year for the capital with over 5,000 new rooms opened or re-opened in response to growing demand for accommodation thanks to the 2012 Olympic Games and the Queen’s Diamond Jubilee celebrations for example.”
Indeed as demand in London sky rockets next year numerous hotel brands including Holiday Inn Express have been popping up around the city, particularly in east London, fuelled not only by the new Olympic Park but also but the creation of new Special Enterprise Zones including the Royal Albert Dock, launch of Westfield shopping centre in Stratford and expansion of ExCel exhibition centre and London City Airport.
With tourists spending in excess of £9.3 billion a year in the city and a predicted increase in visitor numbers, new hotels in the east of London are a welcome addition with a very rare opportunity having emerged for investors.
“Affording an enhanced hotel experience, we at Property Frontiers are allowing investors from all over the world a rare opportunity to purchase an asset class seldom accessible to individuals. Holiday Inn Express, London Excel, located at the Royal Albert Dock will allow investors the opportunity to gain affordable entry into the highly sought after, lucrative London market. Indeed, many investors have been previously put off investing in Hotel rooms due to the lack of a viable exit strategy but with this particular development there is a buyback plan at the end of the investment term.”
Priced at 22% below independent RICS valuations and with VAT paid by the developer, saving investors a considerable £25,000, Holiday Inn Express, London Excel welcomes buyers from all over the world with 50% non-status finance upon completion available.
Set over four floors and consisting of two buildings with 204 en suite rooms, investors can purchase a hotel room on a 199 year leasehold for £125,000 and along with an established Holiday Inn Express brand, investors can enjoy a projected 10.5% net income by year 5 as well as a defined exit strategy.
For more information on investing in London hotel market please contact the experts Property Frontiers today on +44 (0) 1865 202 700.